Update: As of January 1st, 2012 the Quebec Sales Tax (QST Rate) which had gone up from 7.5% to 8.5% on January 1, 2011 will now increase to 9.5%. The effective sales tax in Quebec will go up from 13.925% to 14.975%. Since QST is calculated on the net amount + GST, the effective rate is actually 14.975% (and not 14.5%) . In other words the effective QST rate is 9.975%. The instructions below are equally applicable, except the new QST rate to enter is 9.5%.
On January 1st, 2011, Revenue Quebec will be increasing the QST rate to 8.5% (yay!), bringing the effective rate of QST to 8.925% andtotal sales taxes (GST and QST) to 13.925% (since the QST is actually charged on the net price + GST.) This will impact anyone who charges QST including small businesses and self employed individuals, and invoicing software and processes should be updated to reflect the change. Further details about the rate increase can be found at Revenue Quebec QST Rate Increase page. Suffice it to say that there are no major changes in the application of the rates.
For those of you using Quickbooks you will need to update the QST being charged on both sales and purchases. The goal is to make a copy of the already existing QST on Sales and QST on purchases items, which will maintain the old rate. Once this is done the existing "items" should be updated with the new rate. This will automatically feed into and update the sales tax codes, so that you do not have to re-create them. Keep in mind that this should be done on January 1st, 2011 or first day back after the holidays, so that transactions prior to 2011 are not affected. The following are the steps required to make the change:
1. Select Item List from the Lists Menu
2. Right Click on the "QST on Sales" Item and select "duplicate" item
3. Update the details of the "duplicate item" by updating the name and description to include 7.5% (to avoid confusion). Also ensure that the tax rate is 7.5%
4. Open (double click) the original QST on Sales item and change the rate to 8.5%
5. Repeat Steps 1 to 4 for QST (ITR) /QST on Purchases
Making the change is fairly straightforward, however if you are not comfortable you should contact your accountant. Before doing anything else, it is a good idea to verify that the changes have been implemented correctly by generating an invoice or sales receipt and preparing a bill or cheque.
Should you have any questions or problems, please do not hesitate to leave a comment below.
Ronika Khanna is a Montreal based accountant who helps small businesses achieve their financial goals. To receive regular updates of articles pertaining to small business, accounting, tax and other topics of interest to business owners you can sign up here. You can also follow her on Facebook or Twitter.